FY2019 Full Year Results 26 August 2019 Table of contents 01 - - PowerPoint PPT Presentation

FY2019 Full Year Results

JAPARA HEALTHCARE

26 August 2019

Table of contents

01 Overview 2 02 Strategic initiatives 11 03 Industry and business observations 18 04 Summary and outlook 24 05 Appendices 26

Overview

01

2

FY2019 highlights

3

Strong care and cash flow results with ongoing investment in business operations and developments for improved resident outcomes and future earnings growth

• 1. Average occupancy excludes three greenfield developments opened during FY2019 being The Highbury, Brighton-Le-Sands and Rye Sands
• 2. Profit attributable to members of the Group

Total revenue

$399.8m

Up 7.1% on FY2018 due mainly to full year contribution of Riviera Health acquisition

Occupancy

93.0%

FY2019 average underlying

• ccupancy1

NPAT2

$16.4m

Down 29.6% on FY2018 due to lower non-recurring earnings and increasing depreciation and interest expense on developments in ramp up

Care

100%

100% accreditation record maintained with 10 accreditations

• ver FY2019

EBITDA

$49.6m

Recurring EBITDA of $48.6m up 2.5% on FY2018

Dividends

6.15cps

3.35 cps final dividend (50% franked) 2.80 cps interim dividend (unfranked)

Net RAD and ILU inflows

$44.7m

$27.7m RAD uplift from mature homes

Developments

300+

303 new places added including three new homes $99.4m net expenditure on land and construction

Net debt

$179.0m

Net debt at 30 June 2019 with core net debt of $44.5m and development debt of $134.5m

Japara’s commitment to quality and care

4

Japara’s “CREATE” values of compassion, respect, excellence, accountability, teamwork and enjoyment underpin our approach to care

Care vision

• Our vision at Japara is to enrich every life that we touch
• We welcome the special opportunity we have to share in and nurture the

lives of our almost 4,000 valued residents under a model centered on providing excellent care and services with dignity and respect

• Registered nurses are rostered on every shift, every day at all Japara

homes

Dementia care

• We are proud to be a leader in dementia-specific care and continue to roll
• ut our specialist dementia care model across our new and re-developed

homes

• 19 of our homes have specialist, secure dementia care units
• The concept of a small home has been adapted to reflect optimal design

and living principles for residents living with dementia

• Our dementia care model, facilitated by dedicated support teams,

promotes independence, personal choices and quality of life with residents encouraged to live actively and purposefully reflecting our philosophy of “living life as usual“

• Resident outcomes are overwhelmingly positive with reduced and better

managed interventions and improved lifestyle and behaviours

Quality and care standards

• Japara maintained 100% accreditation across its portfolio in FY2019
• There was an increase in the frequency and duration of accreditation

visits in FY2019 with 10 of Japara’s homes re-accredited during the year and a further 57 unannounced assessment contacts

Resident and staff member, Millward Japara resident, Anglesea

FY2019 strategic initiatives

5

Greenfield developments

• Completion and opening of three

new greenfield developments totalling 219 places and our 50th home, Robina Rise in July 2019

• Two homes under construction at

Mt Waverley (105 places) and Newport (60 net new places)

• Planning

approvals received for several developments including at Belrose (102 places) and Lysterfield (90 places)

• 358 places allocated in 2019 ACAR

for greenfield developments

Brownfield developments

• Extensions

totalling 84 places completed at Kingston Gardens and Mirridong

• Vacant land adjacent to homes in

Victoria and South Australia acquired for future development purposes

• 29 places allocated in 2019 ACAR

for brownfield developments

Significant refurbishments

• Six homes significantly refurbished

in FY2019 with a further six expected to complete in FY2020

• 33 homes currently qualifying for

the maximum accommodation supplement

People

• Our workforce of ~5,600 dedicated

staff provide our ~4,000 residents with personalised care 24 hours a day, 7 days a week

• Professor

Leanne Rowe AM appointed to the Board bringing extensive clinical experience

• Several additional senior executive

appointments during the year to improve consumer engagement and the management

• f
• ur

property portfolio

Measureable achievements from development and people initiatives during the year

Rye Sands Mirridong Kingston Gardens Staff member, Millward

FY2019 earnings

6

Government temporary subsidy increase mitigated rising staff and other costs and impact of falling occupancy

Highlights

• Significant contribution from Government temporary subsidy increase to ACFI of 9.5% from 20 March 2019 to 30 June 2019
• Riviera Health incremental contribution up on FY2018 by $2.1m to $2.8m (excluding the temporary subsidy increase)
• Wage rate increases exceeded sustainable Government funding growth via ACFI indexation (of 1.2% in FY2019)
• New developments and homes significantly refurbished contributing as expected
• Non-wage cost increases driven by additional advertising for new home openings and to support occupancy, higher utility costs, therapy expenditure and costs

associated with preparation for new aged care quality standards introduction

• Average FY2019 occupancy of 93.0%2 below FY2018. Occupied beds increased by 86 over the period
• Direct Aged Care Royal Commission costs higher than expected at $1.8m
• 1. Refer to page 30 for a reconciliation of net non-recurring items
• 2. Average occupancy adjusts for places ramping up at new developments (in FY2019 The Highbury, Brighton-Le-Sands and Rye Sands are excluded) and places offline

for refurbishment

FY2019 EBITDA bridge ($m)

50.7 47.4 48.6 49.6 3.3 7.9 2.1 2.4 2.7 6.5 3.9 1.4 2.1 1.0

FY2018 EBITDA Net non- recurring items FY2018 recurring EBITDA Temporary subsidy boost Incremental Riviera Health Sig refurbs / developments COPE increase Staff costs Non wages costs Pre-reform run-off Occupancy FY2019 recurring EBITDA Net non- recurring items FY2019 EBITDA

1 1

FY2019 NPAT1 and financial position

7

NPAT1 and cash flows reflect significant investment in developments and technology to underpin future growth and provide better outcomes for our residents

Highlights

• FY2019 NPAT1 of $16.4m (FY2018 of $23.3m) lower largely due to development activities with higher depreciation (increase of $2.8m) and net interest expense

(increase of $2.1m) incurred on completed developments

• $99.4m net expenditure on development pipeline comprising predominantly land acquisitions and construction
• IT & maintenance capex includes $17.1m of IT expenditure ($6.9m Wi-Fi rollout, $4.1m ERP system implementation and $1.9m nurse call system upgrade) and

$9.2m of maintenance expenditure

• Five year, $345m syndicated loan facility established in December 2018

—

Core net debt of $44.5m (0.9x FY2019 EBITDA)

—

Core debt increased as developments complete and debt is moved from construction to core facility less pay down from cash flows

—

Available liquidity of $166m

30.3 82.6 37.6 34.2 51.8 133.6 159.9 86.0 17.6 81.8 26.3 15.7 Net debt as at 30 June 2018 Cash from operating activities Net RAD inflows Net land / asset purchases Construction IT & maintenance capex Dividends Net debt as at 30 June 2019 Development net debt largely attributable to Robina, Mt Waverley, Newport, Kingston Gardens, Brighton-Le- Sands and land holdings Development debt Core net debt 179.0 116.3

FY2019 net debt movement ($m)

34.0 44.7 134.5 44.5

• 1. Profit attributable to members of the Group

Jun 18 Net developments Sig refurb Kiverton Park Dec 18 Net developments Sig refurb Jun 19

Key operational metrics

8

Challenging occupancy environment impacting key cost ratios, while increased bed prices have supported RAD inflows

• 1. Average occupancy adjusts for places ramping up at new developments (in FY2019 The Highbury, Brighton-Le-Sands and Rye Sands are excluded) and places offline

for refurbishment

• 2. 30 June 2019 occupancy includes all homes but excludes places offline for significant refurbishment and in ramp up
• 3. Metrics shown exclude the impact of all non recurring items in all periods and the Government temporary subsidy increase in 2H 2019
• 4. Prior period comparatives have been adjusted to exclude Capital Refurbishment Deduction revenue in those periods
• 5. Calculated as the number of concessional residents / operational places

Operational metrics

2H FY2019 1H FY2019 2H FY2018 1H FY2018 Number of homes 49 49 48 44 Operational places (end of period) 4,235 4,125 4,069 3,906 Average occupancy1 92.2% 93.6% 94.0% 92.3% Average revenue per occupied bed day ($)3, 4 279.6 276.6 276.7 275.0 Average Government revenue per occupied bed day ($)3 201.1 201.1 199.8 198.1 Staff costs to revenue3, 4 72.6% 69.7% 69.5% 70.3% Non-wage costs to revenue3, 4 17.6% 17.3% 16.6% 16.5% Average concessional residents5 38.5% 39.3% 38.7% 38.2% Average incoming bed contract price ($’000) 378.1 355.7 323.9 350.6 Net RAD/Bond & ILU loan inflow ($m) 15.8 28.9 15.7 25.9

Operational place movement

4,069 4,125 4,235 +57 +29

• 30

+114

• 4

Highlights

• Average FY2019 occupancy of 93.0%1 below FY2018 and impacted by

the Royal Commission. Occupancy at 30 June 2019 was 92.8%2

• Since 30 June 2019 occupancy has remained relatively stable as
• ccupied places have increased in line with operational place increases

from new developments

• Staff cost to revenue ratio increase primarily caused by reduced
• ccupancy and lower Government revenue combined with increased

wages from EBA rate increases

• FY2019 EBITDA per occupied place of $12,994 (vs FY2018 of $13,969)

RAD Combination DAP

Resident trends

9

Trends in contract prices and payment preferences of non-concessional residents relatively stable

Non-concessional portfolio mix as at 30 June 2019 (30 June 2018 in brackets) Total Residents

3,750 3,800 3,850 3,900 3,950 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19

Highlights

• Stable RAD/DAP/combo trends with little change in resident preference

evident

• 3,929 residents as at 30 June 2019 with further growth to 3,969 residents

as at 23 August 2019

• Average contract values continue to increase with new and refurbished

places in particular commanding higher prices

55.8% (55.3%) 17.7% (17.6%) 26.5% (27.0%) 250 300 350 400 450 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19

Average incoming bed contract price ($’000)

487.0 160.3 132.6 15.9 530.6 100 200 300 400 500 600 700 RADs/Bonds at start

• f period

Incoming RADs - mature homes RADs/Bonds Refunds - mature homes Net RADs Greenfield/Brownfield Homes RADs/Bonds at end of period

FY2019 RAD liability movement

10

Growth in mature home RAD inflows with developments expected to contribute further as homes mature

Highlights

• Net RAD liability movement of $43.6m in FY2019

—

$27.7m from mature homes (includes an increase in probate liability of $12.4m and excludes net ILU inflows of $1.1m)

—

$15.9m from completed greenfield and brownfield developments

• FY2020 RAD uplift expected as new homes ramp up

—

Three greenfield homes were commissioned during October and December 2018 and Robina Rise has also recently opened in July 2019

—

An immediate focus on the opening of a new home is building occupied beds quickly, sometimes with non-RAD paying residents, and therefore RAD inflow can be more gradual

RAD cash flow ($m)

45.6m 58.0m Probate liability

Strategic initiatives

02

11

Japara’s portfolio

12

Japara has focused on meeting the communities’ care needs by developing new and upgrading existing homes and acquiring medium size portfolios and improving their care and amenity

Portfolio summary and growth

• Japara’s aged care portfolio currently comprises 50 homes across five states

—

Two further developments are under construction (Mt Waverley & Newport)

—

Three homes are leased with the remainder owned freehold

• Japara has a greenfield development portfolio comprising:

—

Six owned sites expected to complete over the next 3 years; and

—

Two further regions where licenses are held but sites are required

• Japara also has several brownfield development opportunities and a small

number of surplus assets

• Japara has acquired three portfolios with ~1,110 operational places since listing:

—

Whelan Care – August 2014 (258 places plus 41 senior living apartments)

—

Profke – October 2015 (587 places across four homes)

—

Riviera Health – April 2018 (265 places across four homes)

• Japara has also completed 16 developments since listing:

—

413 new greenfield places at Riverside Views, The Highbury, Brighton-Le- Sands, Rye Sands and Robina Rise

—

Over 350 net new brownfield places at Millward, Mirridong, Albury, Kelaston, Bayview, Kirralee, George Vowell, St Judes, Central Park, Noosa and Kingston Gardens

• A program of home refurbishment has also been undertaken with 33 homes

now qualifying as Significantly Refurbished

South West Rocks 5 3 6 3

20

Gympie Noosa Albury Adelaide Victorian Goldfields Greater Geelong Gippsland Launceston Melbourne Coffs Harbour Sydney Wyong 4 2 Robina

Development pipeline

13 Near-term development pipeline (net new places)

26 52 18 106 60 105 25 60 28 38 106 102 90 122 90 105 30 30

FY2019 Strzelecki House Robina Kingston Gardens (stage 2) Mt Waverley Brighton-Le-Sands (stage 2) FY2020 Newport Albury Brighton Mitchelton Belrose FY2021 Lysterfield Highton Reservoir Gold Coast Lower Plenty Kelaston FY2022

FY20 314 places FY21 334 places FY22 467 places

Greenfield (886 net new beds) Brownfield (229 net new beds) Developments ramping up (52) Offline due to refurbishment (26 beds) Operational beds (4,235)

Japara’s near-term development pipeline comprises 1,115 net new places with new developments added on the Gold Coast, Lower Plenty and Kelaston

4,235 4,627 4,961 5,428

Robina Rise case study

14 Robina Rise (QLD)

• Robina Rise, located in the Gold Coast suburb of Robina, is a new 106

bed home, Japara’s fiftieth home

• Robina Rise was designed to include smaller hubs which create a

home-like environment

• The 4,719 sqm site was acquired in January 2017 for $5.1m and

construction commenced in May 2018

• The total development cost (excluding land) was $28m
• The home includes a 16 place, ‘small house’ memory support hub, an
• n-site café, beauty salon, bar and theatre as well as a rooftop garden

and entertainment space

• Robina Rise opened on 16 July 2019 and currently has 55 residents1

Robina Rise, Japara’s newest home, opened in mid-July 2019 and is currently home to 55 residents

Robina Rise Aerial Robina Rise Rooftop Terrace

• 1. As at 23 August 2019

Robina Rise Resident Lounge

FY2019 completed developments

15

Recently opened greenfield homes performing well

FY2019 development activity

• Rye Sands (opened November 2018)

—

New 99 single room home located on the Mornington Peninsula approximately one hour from Melbourne

—

Currently has 70 residents1

• The Highbury, Glen Waverley (opened October 2018)

—

New 60 single room home located in metropolitan Melbourne

—

Currently has 44 residents1 (June 2019 occupancy of 59 residents)

• Brighton-Le-Sands (opened October 2018)

—

New 60 single room home located in metropolitan Sydney

—

Currently has 56 residents1

• Mirridong (opened October 2018)

—

16 single room, ‘small house’ memory support accommodation extension to existing Bendigo home

• Kingston Gardens

—

New 68 single room extension opened September 2018

• Six homes significantly refurbished in FY2019 with a further six expected

to complete in FY2020

• 33 homes currently qualifying for the maximum accommodation

supplement

• 1. As at 23 August 2019

The Highbury Rye Sands

Near-term developments update

16

Good progress made on near-term development pipeline

FY2020 and beyond development activity

• Kingston Gardens, Springvale South

—

Remaining 60 places currently being fully refurbished as stage 2 of the development (expected to open September 2019)

• Strzelecki House, Mirboo North

—

Construction underway on a 14 place extension and significant refurbishment of the existing home due for completion in September 2019

• Mount Waverley (opening 2020)

—

Construction underway on a 105 single bed room home in Melbourne

• Brighton-Le-Sands stage 2 (opening 2020)

—

Construction underway on a 25 place extension of the existing home

• Belrose, Sydney

—

Development approval obtained for a 102 bed home

• Lysterfield, Melbourne

—

Development approval obtained for a 90 bed home

• Highton, Geelong

—

Development approval obtained for a 122 bed home

• Brighton, Melbourne

—

2,500 sqm of land secured adjacent to Japara’s Elanora home in June 2019 which will enable the future redevelopment of this site

• Oaklands Park, Adelaide

—

1,219 sqm of land secured adjacent to Japara’s Oaklands home in June 2019 which will facilitate the extension of this home

• March 2019 ACAR

—

358 places were allocated to Japara for greenfield development in Coolangatta, Carlingford and Mitchelton

—

29 places allocated to Japara for brownfield development in Albury

Kingston Gardens Render Mount Waverley Render

Land holdings Net new places Book value ($m) Mitchelton (QLD) 106 6.7 Belrose (NSW) 102 7.4 Lysterfield (VIC) 90 4.7 Highton (VIC) 122 4.3 Reservoir (VIC) 90 7.6 Kingston Way Estate (VIC)

• 6.4

Toukley (NSW)

• 1.8

Bundaberg (QLD)

• 0.7

Glenning Valley (NSW)

• 1.4

Total 510 41.0

Development funding

17

Japara has made a significant investment in its development pipeline with future RADs expected to reduce debt and provide funding for further growth

Development funding summary

• Japara has continued to invest in greenfield and brownfield developments to underpin

future earnings growth

• Developments continue to provide attractive risk-adjusted returns (refer Appendix 7 for

indicative greenfield development cash flows)

• Japara has recently delivered 429 net new places and expects to deliver a further 81

net new places with minimal further expenditure required

• Together these 510 places are projected to generate a further ~$100m in RAD inflows

(see table for detail)

• Two further greenfield developments currently under construction (Mt Waverley and

Newport) are expected to add a further 225 places and contribute ~$68m in RAD inflows

—

~$47m in capital expenditure still required to complete these developments

• Expected RAD inflows from the above 735 total places assume a ‘look through’ ~65%

RAD preference for non-supported residents and a weighted average RAD to local house price ratio of between 55%-60%

• The existing portfolio also continues to deliver mature home RAD inflows
• In addition, Japara has a number of land holdings and licenses/approvals supporting

medium-term growth

• Net debt has increased to $179.0m due to this investment in the portfolio

—

Core net debt of $44.5m (0.9x FY2019 EBITDA)

—

Development debt of $134.5m

—

Available liquidity of $166.0m Developments ramping up Net new places Expected future RADs ($m) Capex remaining ($m) Riverside Views 88

• Rye Sands

99

• The Highbury

60

• Brighton-Le-Sands

85 5.2 Kingston Gardens 56 1.2 Mirridong 16

• Robina Rise

106

• Total

510 97-101 6.4

Industry and business

• bservations

03

18

Recent sector developments

19 Royal Commission into Aged Care Quality and Safety

• The Commission has taken a thorough and wide-ranging review of the

aged care sector

• Hearings have occurred in all States and Territories except for Tasmania

and ACT

—

There have also been Community Forums allowing for direct community access to the Commissioners

• Japara gave evidence to the Royal Commission in Perth from 24 to 26

June 2019 with the focus on:

—

the delivery of Person-Centered Care at our Mitcham home in South Australia; and

—

• ur processes to meet obligations for compulsory reporting of

reportable incidents to the Department of Health

• The Commission’s Interim Report is due at the end of October 2019
• The Final Report is expected in April 2020

Aged care provider temporary general subsidy increase

• The Federal Government implemented a $320m general subsidy

increase on 20 March 2019 effected via an increase to the rate of residential care basic subsidies of approximately 9.5%

• Japara received an additional $7.9m from this subsidy increase
• This subsidy increase ceased on 30 June 2019

The sector continues to be subject to a significant amount of review and proposed reform

Transition to the new single Aged Care Quality Standards

• New Aged Care Quality Standards came into effect from 1 July 2019,

replacing a number of existing standards including the Accreditation Standards, Home Care Standards and Transition Care Standards

• In order to support adherence to the new standards, Japara undertook a

comprehensive transition plan, including reviewing all of its current policies and procedures against the new standards and updating them where necessary

• We also implemented an on-line education program to help train our

~5,600 staff in delivering care in line with the new Standards

Resource Utilisation Classification Study (RUCS) update

• In March 2019 the University of Wollongong delivered a suite of seven

reports to the Federal Aged Care Minister with recommendations on changing the Government aged care funding structure

• The purpose of this study was to determine the characteristics of

residents that drive residential care costs, and use this information to inform the Government’s consideration of future reform options

• The RUCS Sector Reference Group (comprising representatives from

Government and industry) have agreed to continue meeting to project plan any future changes to the Government’s aged care funding model

• Trials of the proposed Australian National Aged Care Classification (AN-

ACC) assessment model are expected to commence in late 2019

• A key difference of this model is the use of an external workforce to

assess the care needs of the resident (compared to current ACFI internal assessment model subject to external validation audits)

1,000 2,000 3,000 4,000 5,000 6,000 7,000 90% 91% 92% 93% 94% 95% 96% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Annual residential aged care sector occupancy (LHS) vs annual net place additions (RHS)

ACFA/AIHW Occupancy (LHS) MIRUS Occupancy (LHS)

Sector occupancy and net place additions

20

Sector occupancy has declined over the past four years, particularly in older facilities, as the supply of new places has exceeded growth in resident numbers

Source: AIHW, ACFA, MIRUS Australia AIHW/ACFA data includes all facilities, places and residents. MIRUS Australia data comprises a sample of approximately 30% of industry facilities, places and residents

ACFA/AIHW net new places (RHS)

Residential care acuity has increased over time

21

Overall levels of acuity in residential aged care increased until 2017 when Government scoring changes reduced the measure of acuity in the complex health care domain

Source: GEN Aged Care

0% 10% 20% 30% 40% 50% 60% 70% 2009 2011 2013 2015 2017 Nil Low Medium High

Activities of Daily Living Acuity

0% 10% 20% 30% 40% 50% 60% 70% 2009 2011 2013 2015 2017

Nil Low Medium High

Complex Health Care Acuity

(27.3%) p.a. growth 6.5% p.a. growth 0.6% p.a. growth (10.5%) p.a. growth 0% 10% 20% 30% 40% 50% 60% 70% 2009 2011 2013 2015 2017

Nil Low Medium High

Cognition and Behaviours Acuity

(14.2%) p.a. growth 6.3% p.a. growth (1.7)% p.a. growth (8.4)% p.a. growth (28.8%) p.a. growth 17.2% p.a. growth 1.0% p.a. growth (9.8%) p.a. growth

Material impact from home care not evident

22

The proportion of 70+ year-olds in residential care has dropped over time with no noticeable impact from recent additional home care packages (comprising mainly level 2 packages)

Source: Australian Bureau of Statistics, ACFA, AIHW, GEN Aged Care

5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 5 10 15 20 25 30 35 40 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Packages (‘000) Level 1 Package Level 2 Package Level 3 Package Level 4 Package

New annual home care recipients by package value (‘000)

$8,750 p.a. package value $50,750 p.a. package value $33,500 p.a. package value $15,250 p.a. package value

Total residential aged care residents as % of population >70 years

Revenue and expense growth

23

Annual indexation of Government aged care funding has not kept pace with increases in the largest aged care cost being care staff wages

Source: GEN Aged Care Data

0% 1% 2% 3% 4% 5% 2010 2011 2012 2013 2014 2015 2016 2017 2018 Commonwealth Own Purpose Expense (COPE) ACFI indexation Age Care Award 2010 annual increase

Annual residential aged care funding and cost escalation rates

Summary and outlook

04

24

FY2019 summary and FY2020 outlook

25

Focus on delivery of business initiatives in a challenging environment

FY2019 Summary

• Strong earnings contribution from recently completed greenfield and

brownfield developments and refurbishments

• Earnings also boosted by the Riviera Health portfolio acquisition which

contributed for the full 12 month period and the Government’s temporary subsidy increase

• EBITDA of $49.6m down on FY2018 by 2.2% largely due to non-recurring

items with recurring EBITDA up by 2.5%

• Balance sheet strength maintained with net bank debt of $179.0m at 30

June 2019 and available liquidity of $166.0m

FY2020 Outlook

• Japara expects FY2020 EBITDA to be 5% to 10% lower than FY2019
• Subject to no material changes in market or regulatory conditions
• The funding environment continues to present challenges and occupancy

remains below historic levels

• Recently completed developments are expected to help mitigate industry

headwinds as they contribute a full year of earnings and annual ACFI indexation is expected to partially offset wage rate increases

• Japara continues to focus on the delivery of its developments with over

300 net new places expected to be opened in FY2020

• Strong cash flow is expected driven by RAD inflows and underpinned by

higher bed contract prices

Japara Resident Japara Resident

Appendices

05

26

Appendix 1: Detailed Profit and Loss

27

FY2019 FY2018 Change $'000 $'000 % $'000 Revenue Government care and accommodation funding 287,735 262,981 9.4% 24,754 Resident fees 107,202 98,542 8.8% 8,660 Other income 4,831 11,665

• 58.6%

(6,834) Total revenue & other income 399,768 373,188 7.1% 26,580 Expenses Employee benefits expense (277,563) (258,967) 7.2% (18,596) Resident costs (34,225) (31,874) 7.4% (2,351) Other costs (38,427) (31,694) 21.2% (6,733) Total expenses (350,215) (322,535) 8.6% (27,680) EBITDA 49,553 50,653

• 2.2%

(1,100) Depreciation and amortisation (19,995) (17,150) 16.6% (2,845) EBIT 29,558 33,503

• 11.8%

(3,945) Net finance costs (5,914) (3,817) 54.9% (2,097) Income tax expense (7,211) (6,359) 13.4% (852) NPAT1 16,433 23,327

• 29.6%

(6,894)

• 1. Profit attributable to members of the Group

Appendix 2: Detailed Statutory Cash Flow Statement

28

FY2019 FY2018 $'000 $'000 Cash flows from operating activities: Receipts from customers 389,844 361,250 Payments to suppliers and employees (347,516) (315,824) Income taxes paid (2,347) (6,342) Interest received 414 674 Finance costs paid (6,436) (4,263) Net cash provided by operating activities 33,959 35,495 Cash flows from investing activities: Purchase of land & buildings (18,289) (19,626) Proceeds from sale of land and buildings 1,671 313 Purchase of plant and equipment (29,687) (10,158) Capital works in progress (78,387) (78,753) Proceeds from sale of surplus resident places 3,416

• Deposits paid under land contracts

(960)

• Purchase of resident places

(3,423)

• Purchase of aged care businesses
• (40,317)

Net cash used in investing activities (125,659) (148,541) Cash flows from financing activities: Proceeds from issue of share capital 1,733 634 Dividends paid (17,448) (25,897) Net proceeds from bank borrowings 65,000 84,500 Proceeds from RADs and ILU resident loans 183,262 190,185 Repayment of RADs/accommodation bonds and ILU resident loans (138,533) (148,594) Net cash provided by financing activities 94,014 100,828 Net increase/(decrease) in cash and cash equivalents held 2,314 (12,218) Cash and cash equivalents at beginning of the year 29,158 41,376 Cash and cash equivalents at end of the year 31,472 29,158

Appendix 3: Balance Sheet

29

30-Jun-19 30-Jun-18 $'000 $'000 Assets Current assets Cash 31,472 29,158 Trade and other receivables 14,640 9,356 Current tax receivable

• 2,629

Other assets 6,216 6,405 Total current assets 52,328 47,548 Non-current assets Trade and other receivables 2,347 1,834 Non-current assets held for sale 2,192 1,728 Property, plant and equipment 787,767 687,720 Investment property 39,200 38,398 Intangible assets 494,801 491,378 Total non-current assets 1,326,307 1,221,058 Total assets 1,378,635 1,268,606 Liabilities Current liabilities Trade and other payables 27,005 38,570 Other liabilities 8,568 3,650 Borrowings 40,750 21,000 Current tax payable 377

• Other financial liabilities

554,649 509,348 Employee provisions 36,645 33,456 Total current liabilities 667,994 606,024 Non-current liabilities Borrowings 169,750 124,500 Deferred tax liabilities 2,420 563 Employee provisions 3,975 3,741 Other financial liabilities 2,412

• Total non-current liabilities

178,557 128,804 Total liabilities 846,551 734,828 Net assets 532,084 533,778 Equity Issued capital 524,695 522,962 Hedging reserve (2,412)

• Retained earnings

9,801 10,816 Total equity 532,084 533,778

Appendix 4: Non-recurring earnings reconciliation

30

FY2019 FY2018 $m $m Non recurring items Profit on sale of surplus bed licences 3.4

• Property revaluation gains

0.8 1.7 Profit on sale of land 0.3

• Royal Commission direct costs

(1.8)

• Greenfield start-up losses

(1.0) (0.8) Redundancies / restructuring (0.7) (3.4) Net gain on acquisition

• 9.6

Capital Refurbishment Deduction adjustment – prior year

• (2.9)

Corporate office relocation provision and discontinued projects

• (0.9)

Total 1.0 3.3

Appendix 5: Portfolio Metrics

31

As at As at Change 30 June 2019 30 June 2018 Resident mix Concessional 1,635 42% 1,627 43% 0.5% RAD 1,170 30% 1,125 29% 4.0% DAP 555 14% 549 14% 1.1% Combination 370 9% 360 9% 2.8% Pre-reform high-care places 23 1% 35 1% (34.3%) Respite 159 4% 115 3% 38.3% TCP / Other 17 0% 32 1% (46.9%) Total residents 3,929 100% 3,843 100% 2.2% Staffing Number of staff (including part time and casuals) 5,628 5,451 3.2% Places Operational places 4,235 4,069 4.1% Non-operational places 591 466 26.8% Provisional ACAR allocations 973 922 5.5% Total places 5,799 5,457 6.3% Places (metro/major regional, regional split) Metro/major regional 4,558 79% 4,231 78% 7.7% Regional 1,241 21% 1,226 22% 1.2% Total places 5,799 100% 5,457 100% 6.3% Geographic spread (places) VIC 67% 65% NSW 14% 15% SA 7% 8% QLD 7% 7% TAS 5% 5% Total 100% 100% Funded bed days 1,391,966 1,323,563 5.2%

Appendix 6: Developments update

32

Significant greenfield developments program comprising 946 new places

Greenfield developments Program status Total new places Net new places Estimated resident admission

Robina (Gold Coast) Completed July 2019 106 106 1H FY2020 Mt Waverley (Melbourne) Construction 105 105 2H FY2020 Newport (Melbourne) Construction 120 60 1H FY2021 Mitchelton (Brisbane) Tender 106 106 1H FY2021 Belrose (Sydney) Tender 102 102 2H FY2021 Lysterfield (Melbourne) Detailed design 90 90 1H FY2022 Reservoir (Melbourne) Town planning 90 90 1H FY2022 Highton (Geelong) Detailed design 122 122 1H FY2022 Gold Coast Concept design 105 105 2H FY2022 Total 946 886

Appendix 6: Developments update

33

• 1. Currently 4 beds are off-line during building works

Recent completed developments Total new places Net new places Completed

Noosa (Sunshine Coast) 12 1H FY2018 Riverside (Tasmania) 88 88 1H FY2018 Glen Waverley (Melbourne) 60 60 1H FY2019 Rye (Victoria) 99 99 1H FY2019 Brighton-Le-Sands (Sydney) 60 60 1H FY2019 Kingston Gardens Stage 1 (Springvale) 68

• 4

1H FY2019 Mirridong (Bendigo) 16 16 1H FY2019 Total 403 319

Brownfield developments Program status Total new places Net new places Estimated resident admission

Strzelecki House (Mirboo North) Construction 18 181 1H FY2020 Kingston Gardens Stage 2 (Springvale) Construction 60 60 1H FY2020 Brighton-Le-Sands Stage 2 (Sydney) Construction 25 25 2H FY2020 Albury (NSW) Tender 28 28 1H FY2021 Brighton (SA) Tender 52 38 2H FY2021 Lower Plenty (VIC) Concept design 30 30 2H FY2022 Kelaston (VIC) Concept design 30 30 2H FY2022 Total 243 229

Appendix 7: Development cash flows

34

Development projects provide quality new aged care homes for residents and also incremental earnings for operators

Cash flow Negative Positive Yr 1 Yr 2 Yr 3 Yr 4 Yr 5

Planning/Design Ramp up Fit out

Sustainable EBITDA + RAD uplift

• 6,000sqm @ $1,000/sqm+
• Land cost: ~$6m+
• 100 places @ $250,000 per place
• Development cost: ~$25m
• 100 places @ 95%
• ccupancy
• 60% non-concessional
• 65% RAD penetration
• $500,000 per RAD
• Net RAD cash flow:

~$18.5m

Land acquisition Construction

RAD cash inflow

Earnings up-lift $20,000 - $30,000 EBITDA per place Sustainable EBITDA: $2m - $3m p.a.

Equity

• Net residual equity:

~$12.5m

Disclaimer

35

This presentation was prepared by Japara Healthcare Limited (ABN 54 168 631 052), the Company. Information contained in this presentation is current as at 26 August 2019. This presentation is provided for information purposes only and has been prepared without taking account of any particular reader’s financial situation,

• bjectives or needs. Nothing contained in this presentation constitutes investment, legal, tax or other advice. Accordingly, readers should, before acting on any

information in this presentation, consider its appropriateness, having regard to their objectives, financial situation and needs, and seek the assistance of their financial or other licensed professional adviser before making any investment decision. This presentation does not constitute an offer, invitation, solicitation or recommendation with respect to the subscription for, purchase or sale of any security, nor does it form the basis of any contract or commitment. Except as required by law, no representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the information, opinions and conclusions, or as to the reasonableness of any assumption, contained in this presentation. By reading this presentation and to the extent permitted by law, the reader releases the Company and its affiliates, and any of their respective directors, officers, employees, representatives or advisers from any liability (including, without limitation, in respect of direct, indirect or consequential loss or damage or loss or damage arising by negligence) arising in relation to any reader relying on anything contained in or omitted from this presentation. The forward looking statements included in this presentation involve subjective judgment and analysis and are subject to significant uncertainties, risks and contingencies, many of which are outside the control of, and are unknown to, the Company. In particular, they speak only as of the date of these materials, they assume the success of Japara Healthcare Limited’s business strategies, and they are subject to significant regulatory, business, competitive and economic uncertainties and risks. Actual future events may vary materially from forward looking statements and the assumptions on which those statements are based. Given these uncertainties, readers are cautioned not to place reliance on such forward looking statements. Past performance is not a reliable indicator of future performance.